Managed services - Revenue for services rendered

Summary

Billers can use Managed Services to both generate additional revenue and bind their customers more closely. When the biller's underlying network is equivalent to their competitors, the type and quality of the managed services a biller provides may allow them to differentiate their overall offering from their competitors'.

Billers providing managed services can require additional security and maintenance processes in their billing systems to isolate the different user/customer populations accessing the customer data, and to ensure changes performed by one group do not impact the processing of all other stakeholder groups. Older billing systems may not provide the necessary level of separation, and additional / supplemental systems may be required.

What are Managed Services?

Managed services are when a biller performs a business function / service on behalf of their customer, usually on a fee-for-service basis. Most managed services involve performing work the customer could / would have done themselves. Managed services are not offerings intended for residential, small commercial or mass market customers. Instead, large corporate and wholesale customers are usually the target market segments.

Corporate customers

Billers performing managed services for their corporate customers may not charge for all the services they perform. When competing with other providers for the corporate customer's business, the biller may have included managed services for 'free' to improve the attractiveness of their customised offering.

Examples of corporate managed services include:

Aggregation of third party charges - The customer may wish to receive one 'bill' containing all their charges including those incurred on other providers' (i.e. third party) networks. The biller adds value by providing their corporate customer with consolidated billing without them needing to integrate the additional inter-company interfaces, perform the charge consolidation or develop their own billing-related systems. The total interface / consolidation work is not reduced. Instead the biller either charges for it (effectively acting as an outsourcer), or absorbs the cost as part of the total price of 'winning' the customer's business.

Billers consolidating their own charges with those from third parties may choose to perform the consolidation processing after, and external to, their own billing processes. This approach avoids placing third party products and services through the biller's core billing systems, and avoids the costs and other impacts of increased processing complexity, complex financial postings and maintenance inter-dependencies.

If third party charges were processed through a biller's core systems, financial processing would need to address how some charges would generate financial postings (revenue, debt) whilst others wouldn't. System maintenance would become more complex as it would have to consider both the biller's and all the third party processing exceptions as changes were made.

To implement aggregation post-processing, additional (billing-related) system(s) can be required to collect and process the billing data (from all sources) with dedicated staff to manage the external interfaces and data collection / transmission schedules.

Migrate between billing media and formats - Related to charge aggregation, customers with billing data from multiple providers can receive feeds with wildly different formats, timing, physical media (e.g. magnetic cartridge, CD, DVD) or electronic channel technologies (e.g. FTP, email).

The biller could consolidate the feeds into one common format (e.g. in the format of the biller's own billing data...), receive the feeds as they arrive at different times, and provide the customer with homogenised billing data across one data interface at a time of their choosing.

Revenue Assurance - The biller could validate that charges were accurate, expected and aligned with their customer's pricing agreements. The biller could validate both third party and their own charges (with appropriate separation of responsibilities), including how billed charges aligned with the customer's understanding of their connected services (i.e. network provisioning).

Report / statement generation - Billers could use the billing data (with or without third party charges) to generate reports and statements that were based on customer-specific rules and structures supplied (and maintained) by each customer. The reports / statements could break out the customer's spending into more meaningful buckets than their consolidated bill. For example, separate statements could be prepared by high-level corporate business unit (gross costs), by product offerings (per technology / network), or by low-level branch office (local cost control).

Additional reports could identify chargeable events that exceeded specified thresholds. For example, customers could ask to identify all transactions above a certain value, network services with high spending (e.g. excessive numbers of (say) local phone calls), or calls made to nominated destinations (countries, companies, information services). Other reports could graph consumption / cost trends over time.

Such reports could allow customers to identify exceptions quickly and consistently, with the remainder of the customer's billing data receiving a reduced / quicker review once the 'glaring' errors / exceptions were identified.

Wholesale customers

Wholesale customers are resellers of the biller's network, and will have billing needs similar to the biller's own retail division. Depending on the wholesale customer's size, sophistication and strategic choices, they may not wish to perform all the retail billing functions within their own business. Instead, they may 'outsource' them elsewhere, and the biller is ideally situated to capture this work by leveraging their own knowledge, experience and systems (both retail and wholesale).

The operational wholesale relationship between a biller and their wholesale customer can take a wide range of forms. The relationship can range from a 'basic' / 'minimal' relationship where the biller's network just performs transactions and passes the results to the customer, to a 'full service' relationship where the biller does everything on their customer's behalf ('Do everything, just use my logo!'). These operational relationships are different to the commercial / business relationships.

By providing billing functions across multiple customers (perhaps including their own retail operations), billers can achieve economies of scale not available to individual wholesale customers.

Billing on Behalf - Wholesale customers can avoid building a full billing system by instead outsourcing their bill production to an outside party. The wholesale customer would still need to capture and supply details of their customers' rates, chargeable events, bill formatting, address and other billing details, but the IT systems that transform the details into bills would be operated by an outside organisation.

Since the biller already has a demonstrated competency in billing (e.g. in both retail and wholesale business units), they could perform billing on their customers' behalf, pass the financial and other billing results to the wholesale customer, and send the customer's (retail) bills to the biller's own printer. Due to the biller's higher spending and negotiating power, this approach could provide wholesale customers with cheaper printing and postage.

Transactions Rating - A subset of the 'Billing on Behalf' feature set is the rating of transactions performed on the biller's network. Wholesale customers could place the now rated transactions onto their retail bills alongside the simpler and lower volume one-time and recurring charges calculated by their own billing systems. The wholesale customer avoids the need to develop / support / administer a sophisticated rating platform, and yet retains billing responsibility once the 'hard' work of rating has been done.

Any 'retail' rating performed by the biller for their wholesale customers would be separate and additional to the 'wholesale' rating the biller already performs to generate the wholesale customer's own bill.

Service Assurance - Billers could answer their wholesale customers' network service problems in their customer's name and capture details of network service problems directly. This could allow a 24-hour response service not provided for within a wholesale customer's business plan (or cost structure), and reduce the error rate when service queries are first captured by the wholesale customer and later copied / transferred to the network operator (biller) for resolution.

Fraud Analysis - The identification of possible fraud is one high-value area that larger network operators could offer their smaller wholesale customers. Smaller wholesale customers might find this service of more value than the larger wholesale customers who are more likely to develop fraud detection capabilities of their own.

The timing of fraud analysis can also be important when network transactions are passed infrequently from the biller to their wholesale customers. If a fraudulent activity is underway, a day's delay in identification can result in substantial uncollectable revenue. It is in the wholesale customer's best interests to receive timely transactions information throughout the 'day', but failing that have the network operator (i.e. the biller) perform ongoing fraud analysis as transactions are received from their network (i.e. performing a (near real-time) service on the customer's behalf).

If the biller's retail operations perform fraud analysis but exclude wholesale customer for reasons of volume, privacy or 'business separation', the wholesale division can reuse their internal (corporate) competence (but perhaps not the same people) to perform similar analysis across multiple wholesale customers. The biller's retail operations can leverage their costs of fraud analysis across a wider base, and the wholesale business unit will have an additional revenue opportunity (managed service) to offer their wholesale customers.

'Wholesale' fraud analysis might need to identify fraud only 'within' each wholesale customer's service list (i.e. not across wholesale customer boundaries), allow different 'settings' for each wholesale customer, and provide security / separation to allow wholesale customers to access the results of the fraud analysis without accessing other wholesale customers' information.

Who would want to use Managed Services?

Companies starting up a new network businesses may not have existing systems to perform billing-related processing. For example, a large soccer club leveraging their brand name recognition and membership list to start a (virtual) Mobile Phone business (MVNO) will know more about soccer than the intricacies of mobile phone billing. The operator whose network is being resold could sell their billing systems and experience to the soccer club as 'managed services'.

Resellers (wholesale customers) might be quite capable of performing the managed services themselves, but choose not to for strategic reasons of staffing size, costs, geography (no local presence) or focus. Resellers might choose to focus more on their marketing and product development and less on operating their billing functions on a day-to-day basis.

Alternatively, a firm specialising in the managed services (including billing) could perform the operational processing on the (say) soccer club's behalf independent of the network operator. Managed services are often work that must be done by 'someone', the question is 'who' and 'where' - the network operator, a specialised company, or the customer themselves.

Some implications of Managed Services

Billing - Billers providing managed services must decide how they will charge their customers. Aside from 'free' corporate services, billers will face this situation for both their corporate and / or wholesale customers. The charging basis can be per billable service (e.g. rating, billing), per event (e.g. service assurance) or by subscription (e.g. fraud analysis, report generation).

Due to the low number of individual charges levied for managed services (e.g. one charge per managed service per month), the billing of the managed services to the corporate / wholesale customers may be performed manually to reduce the additional costs of including them into the biller's core billing systems.

Custom settings - The billing solutions deployed must allow each corporate or wholesale customer to customise how their individual business functions operate. The maintenance of customer settings must allow for concurrent and independent access, must isolate each customer from their competitors, and restrict access from the biller's retail division (and vice versa).

Wholesale customers may require the ability to change settings within the biller's own network. This is most visible for pre-paid network offerings. For example, a pre-paid, mobile phone offering will require a mechanism through which the wholesale customer can modify their call rating plans to ensure accurate deductions from the (retail) customers' credit balances. This would include the prices, rate periods and thresholds that modify how charges are calculated. Without this ability, wholesale customers will be restricted in how they adjust their prices to respond to competition. Post-paid services are more flexible since rating is performed after the fact and there is no credit balance to be reduced accurately.

Tags: Billing, Managed Services, Wholesale, MVNO, VNO